BMW confronts oversupply on dealer lots – Automotive News

Vehicles are built at MW’s Spartanburg, S.C., plant. A plant expansion shows the company’s self-confidence in its U.S. prospects, a BMW spokesman says.

BMW will certainly most likely spend the remainder of the very first half of this year liquidating inventories in the U.S. as it attempts to reduce a massive stock overhang stemming from the end of last year, as quickly as it edged out Mercedes-Benz and Lexus for the U.S. luxury sales crown.

Comments from BMW executives confirm bearish remarks gained by serious dealership teams that said cars such as the 3 collection were sitting on showroom lots, declining in value along with each day.

“We are adjusting our production plans and reallocating much more SUVs to the U.S.,” CFO Friedrich Eichiner told analysts last week, repeating plans to raise the share of light trucks sold — such as the X5 — to 40 percent from last year’s 33 percent. “The fourth quarter was not as solid as expected, and we took a decision early on to tidy up inventories to plan for maybe a flatter market. That is just what we are doing, and we believe it ought to come to an end in the second quarter.”

BMW nameplates such as the 2 collection had dramatic sales declines this year through April.

From January to March 31, BMW low the supply for its namesake brand from 77 to 43 days, according to the Automotive News Data Center. As a result of the cutbacks in stock, volume for the core BMW brand sank to 95,564 vehicles for the very first four months this year. This decline of 9.4 percent meant it fell behind Lexus and came up nearly 20,000 cars short of Brand-new segment leader Mercedes. Some nameplates such as the 3-collection sedan, 6-collection coupe and convertible and i3 electric auto checked out dramatic declines. Meanwhile the overall U.S. market grew 3.3 percent through April as Americans took advantage of affordable gasoline prices to drive off lots along with Brand-new light trucks.

However, “The premium-auto segment in the USA throughout Q1 in total declined for the very first time,” CEO Harald Krueger said throughout a conference call after publishing outcomes for the group.

Alexander Bilgeri, spokesman for BMW North America, said all of luxury brands have actually experienced slower U.S. sales in the early section of the year, mainly due to the fact that power industry complications have actually rippled in to the financial sector.

Eichiner: “much more SUVs to the U.S.”

“Affluent customers generally ride out recessions OK, yet individual market volatilities can easily straight affect the premium Automobile market, and that’s just what we’re experiencing right now,” Bilgeri wrote in an email.

Strong sales growth “won’t happen again until power and the equity markets stabilize and firm self-confidence improves,” he added. BMW’s expansion of the Spartanburg, S.C., plant, which will certainly raise its supply of crossovers, and of its distribution network for imported vehicles speak to the company’s self-confidence in long term U.S. prospects, Bilgeri said.

AutoNation, the largest U.S. new-Automobile retailer, warned in early January that there was a bulging inventory of unsold cars, especially luxury models. Late last month, Group 1 said it planned to reduce orders, particularly for luxury cars, and claimed BMW, Mercedes and Audi each had much more compared to 90 days of supply at its stores.

When asked regarding the lot of days supply or whether BMW was now suffering from the after-effects of attempting to succeed the sales crown, spokespeople for BMW declined to comment.

The German business attributes the complications to an environment last year in which luxury auto exporters, enticed by a solid dollar that lifted profits spine home, attempted to compensate for fragile Chinese reason by allocating much more and much more vehicles to the U.S.

The complications in the U.S. alarmed some analysts that attempted to extract much more earnings assistance from management compared to BMW was willing to provide.

“You have actually added the U.S. to the risk section in your outlook statement and taken out Russia, yet of road if the U.S. begins slowing for BMW that will certainly have actually a considerably bigger impact on your numbers,” said Evercore ISI analyst Arndt Ellinghorst throughout the call, unable to coax an outlook for the second quarter from the CFO.

In its interim report, BMW warned of a “trend to deteriorating financing conditions” in the U.S. auto market, estimating overall industry sales growth will certainly shed to a price of 1.3 percent from last year’s 5.7 percent. This ought to delivering the market to 17.7 million for the year, the business said.

BMW is now pinning its hopes on a solid second half, throughout which it will certainly finish the three-year expansion of its SUV production capacity that costs $1 billion. By the end of this year, the South Carolina plant, now the company’s largest worldwide, will certainly total 450,000 annually. Additionally, Krueger said imports from Germany of its X1 and 7 collection ought to suggestions enhance U.S. sales.